A question regarding self-directed 401(k) disqualified persons

[John Kinlaw]

Hello friends!

I have a self directed 401(k) question that pertains to disqualified persons. Here's the scenario, my father wants to invest in real estate with his 401(k) self directed and he wants to hire the general contractor's company that I work for as a 1099 employee. Would he be able to hire this company knowing that I might possibly be sent there to work? (I will add that I have zero control over the contractors business entity.)

• I might as well ask a related question. While listening to a BiggerPockets podcast, the guest speaker mentioned that he started his business with a self directed 401(k), then he also said that he himself worked on the property to fix it up. Is this within the rules that govern the account? I would think that as long as a person doesn't pay themselves a salary to work on a project or manage it, and they also don't co-mingle funds, then it should be legal? Any opinions? To take this question one step further, can that plan participant acquire the materials with 401(k) funds or must those acquisitions be handled by a non-disqualified 3rd party?

Thanks for your time sharing the knowledge and wisdom to help us on our paths! =)

[Dmitriy Fomichenko]

I did listen to that podcast. The person did not use ROBS, he used self-directed IRA. Apparently he was ignorant of the IRS rules... which is not an excuse, you must know the rules, they are pretty straight forward. As disqualified person you are not to provide any services or anything of value to the IRA nor can you benefit from the IRA in any way (directly or indirectly).